Articles Tagged With: MIP (Mortgage Insurance Premiums)

August 22, 2024

Comparing FHA Mortgage Insurance to Conventional Mortgage Insurance

There are two types of mortgage insurance: private mortgage insurance (PMI) and Federal Housing Administration (FHA) mortgage insurance. Each has a specific use and purpose and its own price tag, which may vary depending on circumstances. We examine some important facts about each type below. What To Know About Mortgage Insurance Private Mortgage Insurance (PMI) PMI protects lenders if a borrower defaults on a loan with less than a 20% down payment. Lenders consider this insurance necessary for loans that are viewed as higher risk. PMI typically has stricter eligibility criteria than FHA mortgage insurance. Borrowers often need good credit scores (680 or higher) and a debt-to-income ratio of 43%. The cost varies depending on the borrower’s credit score, down payment amount, loan term, and the insurance provider. It is | more...

May 22, 2024

FHA Home Loan Options To Consider

By Joe Wallace

FHA loans have some special features. There are important options to know before you start applying for a home loan. Financing Mortgage Insurance On Your FHA Mortgage Borrowers without a 10% downpayment on their FHA mortgage are required to render a mortgage insurance premium. This is payable for the loan’s lifetime. Those who make a 10% downpayment qualify to have the insurance removed after 11 years. It pays to make the larger downpayment on an FHA mortgage even if you don’t have to. But if you choose to save money upfront on your home loan, you can include the FHA Up-Front Mortgage Insurance Premium (UFMIP) in your home loan amount. Ask your loan officer about this option early. FHA loan rules in HUD 4000.1 require you to pay the entire | more...

March 13, 2024

Home Loan Mortgage Insurance Requirements

By Joe Wallace

When it is time to buy a new home, borrowers have important decisions to make about mortgage insurance. Do you know who is required to pay for mortgage insurance and why? There are home loan programs that offer the option of paying 20% down and sidestepping the lender’s mortgage insurance requirements. Other mortgage loans may require borrowers to come up with a larger down payment to take advantage of the option to stop paying mortgage insurance after 11 years. Some mortgages have no insurance guidelines in this area at all. We examine these programs below. What To Know About Conventional Loan Mortgage Insurance There is no national standard for conventional loan mortgage insurance in terms of lender requirements. Borrowers can expect to pay 20% down on a conventional loan to avoid | more...

February 21, 2024

Who Needs Homeowner Insurance?

By Joe Wallace

FHA loans, VA mortgages, and similar government-backed home loans don’t force the borrower to select specific types of homeowner insurance to protect your investment but that does not mean it’s not necessary. Mortgage insurance protects the lender. If the borrower defaults on the FHA home loan, mortgage insurance minimizes the loss for the bank. Home insurance, on the other hand, is a tool for the borrower. It protects your investment by insuring your home and its contents depending on the wording of your specific policy. First And Foremost Paying for both insurance types may make you feel there is protection for all circumstances. But not all types of damage are covered by your insurer. Did you know that flood insurance is completely separate from insurance for water damage? Some borrowers | more...

February 15, 2022

FHA Mortgage Insurance: What You Need To Know

By Joe Wallace

When you apply for an FHA mortgage, you are required to have mortgage insurance. This comes in the form of an FHA Up-Front Mortgage Insurance Premium which is paid at closing time in cash or financed into the FHA loan amount. You can do one or the other, but you can’t partially finance this premium. That’s the “up front” part. FHA loans require an annual premium paid in monthly installments. This is called a Mortgage Insurance Premium and is not the same as conventional Private Mortgage Insurance. That is required by conventional lenders for certain mortgages without a 20% down payment or better. Private mortgage insurance is known by the acronym PMI, and some borrowers (even some lenders) use MIP and PMI interchangeably even though they aren’t the same thing. | more...

May 20, 2021

Mortgage Insurance And Homeowner’s Insurance

By Joe Wallace

No matter what kind of home loan you apply for, you will have issues related to mortgage insurance to brush up on. Are you a first-time homebuyer? Do you have experience buying a home? In either case, there are things to remember. Some new to buying a home assume (mistakenly) that some kinds of insurance are universal. Then there are those who confuse mortgage insurance with homeowner’s insurance. This is not an unusual mistake to make, but it can cost you. What do you need to know about insurance issues? The first thing involves who is protected under the insurance plan. Mortgage Insurance Premiums (MIP) If you want to avoid paying for mortgage insurance on a conventional loan, you are generally required to put a whopping 20% down. When it | more...

April 15, 2019

FHA Mortgage Insurance Refunds

By Joe Wallace

FHA home loans do not, as conventional mortgages often do (based on LTV), require third-party private mortgage insurance, sometimes known as PMI. Instead, FHA mortgages require mortgage insurance premiums paid as part of your monthly mortgage payment. There is an Up-Front Mortgage Insurance Premium (UFMIP) that is due at closing time in cash, which may also be financed in its’ entirety should the borrower wish to do so. Then the Mortgage Insurance Premiums (MIP) are included in the monthly payment. FHA home loan rules address mortgage insurance issues in HUD 4000.1, which states, “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” That means your loan limit | more...

June 13, 2018

Is There Such A Thing As A Refund For FHA UFMIP Mortgage Insurance?

By Joe Wallace

Is there such a thing as a refund for FHA Up-Front Mortgage Insurance or FHA UFMIP? This mortgage insurance premium is required on FHA loan transactions and must be paid either in cash at closing time or must be financed into the loan amount. FHA loan rules do not allow a borrower to pay a portion and finance a portion of the FHA UFMIP, it must be paid in full using financing or cash. Borrowers have many questions about this FHA mortgage insurance requirement, including whether or not a refund is possible under the right circumstances. FHA forward mortgages require UFMIP as a condition of the loan no matter if the transaction is an FHA One-Time Close construction loan, existing construction purchase, or whether the borrower is buying a manufactured | more...

September 26, 2017

Can I Finance My FHA Loan Up Front Mortgage Insurance Premium?

By Bruce Reichstein

Can I finance my FHA loan Up Front Mortgage Insurance Premium (UFMIP)? And how does it affect my mortgage loan? These are questions many ask, unsure of whether FHA mortgage loan limits include the UFMIP and how they are allowed to pay. FHA Up Front Mortgage Insurance Premiums May Be Financed FHA loan rules in HUD 4000.1, the FHA loan handbook, state clearly that FHA UFMIP may be financed. It will be included in the final loan amount at closing time. UFMIP Must Be Financed Or Paid In Cash HUD 4000.1 instructs the lender to either collect the Up Front Mortgage Insurance Premium in cash at closing time, or have it included into the loan amount. However, the borrower must pay 100% either way-you cannot finance half the amount and | more...

June 13, 2017

What Is Mortgage Insurance And How Does It Work?

By Bruce Reichstein

“What is mortgage insurance?” is a common question for those new to the home loan process. Do you understand how it works? It helps to define the two things referred to by industry professionals as mortgage insurance. There is mortgage insurance which the borrower pays for as a requirement of the FHA loan, then there is the “mortgage insurance” referred to in FHA loan rules which is something else entirely. Note: What we are discussing here is not hazard insurance, which may be a requirement on some, but not all FHA loans. FHA Mortgage Insurance For The Lender The FHA single family home loan handbook, HUD 4000.1, refers to “mortgage insurance” when discussing the FHA’s role in insuring the loan to reduce the risk for the participating lender. On page | more...